July 11, 2013
First Circuit Grants Wells Fargo’s Motion to Dismiss Plaintiff-Homeowner’s Suit to Preclude Foreclosure Sale
The court in McKenna v Wells Fargo Bank, N.A. Case No. 11-1650 (C.A. 1, Aug. 16, 2012) was faced with questions relating to the district court’s subject matter jurisdiction. Here, Wells Fargo’s primary assertion in its removal papers – “that there was federal question jurisdiction present in the case” – turned out to be mistaken as no federal claim was present. However, diversity jurisdiction was found to be sufficient enough to support the state statutory claims that were asserted in the complaint.
Wells Fargo brought a foreclosure action against the plaintiff [McKenna], the plaintiff responded by asserting a right to rescind the mortgage and then filed suit to preclude the foreclosure sale.
The plaintiff claimed a right to rescind on the grounds that [1] Wells Fargo had provided her with only one Truth in Lending disclosure statement at the time of the loan rather than two copies, and [2] Wells Fargo had understated the finance charge in its Truth in Lending statement by more than $35. The lower court then issued a preliminary injunction restraining Wells Fargo from taking further action to sell the plaintiff’s home.
On March 10, 2010, Wells Fargo removed the case to the federal district court in Massachusetts. Wells Fargo asserted that federal question jurisdiction existed. The bank then moved to dismiss for failure to state a claim, and the district court granted the motion. On review, the court found that diversity jurisdiction existed as Wells Fargo was a bank and a citizen of the state where it is “located.” The bank’s location being North Dakota, and the plaintiff being a citizen of Massachusetts, allowed for diversity jurisdiction.
On review the court determined that the plaintiff’s complaint alleged that Wells Fargo made certain misrepresentations. However, the court found that the plaintiff failed to specify the time or place of these misrepresentations or their real content and, as the district court held, these assertions were “too vague to meet the particularity requirement of Rule 9.” The First Circuit affirmed the lower court’s ruling. Further, the suit was not timely under the federal Truth in Lending Act, 15 U.S.C. 1635(a), and the complaint failed to state claims under the equivalent state law.
July 11, 2013 | Permalink | No Comments
July 10, 2013
Minnesota U.S. District Court Finds Homeowners’ Complaint Fails Procedurally and Sanctions Counsel for Frivolous Claims
In Blaylock v. Wells Fargo Bank No. 12-693, 2012 WL 2529197, (D. Minn 2012) the court found six individual property mortgage assignments and foreclosures proper, dismissing the quiet title actions on both procedural and substantive grounds. The court also sanctioned the plaintiff’s attorney for his repeated frivolous claims.
On procedural grounds the court dismissed the claim under FRCP 12 finding that the complaint failed to state a “short and plain” statement upon which relief could be granted for each claim and each party.
The court held that independent of procedural grounds for dismissal, the Plaintiffs lacked substantive theories upon which quiet title relief could be granted. The court quickly discounted the claim that mortgages must be perfected claiming that the argument was based upon the same “faulty logic” as the plaintiff’s second “show me the note” claim that in order to foreclose a party must hold both the note and mortgage on a property. “This argument has been rejected by every federal and state court that has considered it under Minnesota law.” Minnesota and Eighth Circuit precedent clearly determined that a mortgagee may commence foreclosure even if the promissory note had been previously transferred to a third party. See Stein v. Chase Home Fin., LLC, 662 F.3d 976, 980 (8th Cir. 2011); Jackson v. Mortg. Elec. Reg Sys., Inc., 770 N.W. 2d 487 (Minn. 2009). These cases are blogged here and here.
The court also found the assignment of the mortgage proper since each of the mortgages expressly permitted assignment. Each assignment in this case granted legal title, the power of sale, and the right to foreclose to the mortgagee and its successors. The Minnesota MERS Statute §507.413 allows nominees to record an assignment to foreclose and district case law also supported a MERS assignment of a mortgage. See Kebasso v. BAC Home Loans Servicing, LP, 813 F. Supp. 2d 1104, 1109 (D. Minn. 2011).
The fact that some of the notes and mortgages for the plaintiffs were held in trust did not allow plaintiffs to challenge the transfer of the note. The court reaffirmed precedent noting that the plaintiffs had no standing to enforce a trust agreement because they were not party to the agreement between the banks. Furthermore, “securitization is standard practice, and Plaintiff’s loans specifically authorize securitization.”
Finally, the court dismissed the plaintiff’s slander of title claim for failure to establish all the elements of a prima facie claim and sanctioned Plaintiff’s counsel, William Butler, in the amount of $75,000 and awarded attorneys’ fees pursuant to FRCP 11 and 28 USC Sec. 1927 because of counsel’s repeated attempts to litigate frivolous slander and “show me the note” claims. Butler used the same theory and motioned for slander claims in multiple prior cases as well as some pending cases.
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July 10, 2013 | Permalink | No Comments
District of Minnesota Rules in Favor of CitiMortgage, Finding Foreclosure and Assignment of Mortgage Proper Despite Alleged Oral Modification of the Mortgage Prior to Assignment
In LaBrant v. MERS 870 F. Supp. 2d 671 (D. Minn. 2012) 0:11-cv-03029-JRT-LIB the court granted CitiMortgage’s motion to dismiss LaBrant’s claim. LaBrant brought action against CitiMortgage to enforce an oral loan modification as a binding agreement and also sought to have the modification enforced under theories of promissory estoppel, misrepresentation, and unjust enrichment.
LaBrant first contracted for a mortgage with Prime Mortgage Corporation who immediately assigned to CitiMortgage. LaBrant never received a written confirmation of a loan modification from CitiMortgage but claims that CitiMortgage assured him that upon filing the correct paperwork a modification would be granted given Mr. LaBrant’s excessive medical expenses. CitiMortgage claimed that they never agreed to a modification. CitiMortgage later assigned to PennyMac Loan Services who foreclosed on the property when LaBrant failed to continue payments. LaBrant unsuccessfully requested postponement of the foreclosure so he could have time to cure his default.
Enforcing an Oral Agreement. The court dismissed LaBrant’s claim that the alleged oral agreement with CitiMortgage for a loan modification should be enforced. Under Minnesota Statute § 513.33 and Minnesota case law an agreement regarding any financial accommodation is a credit agreement that can only be enforced if it is in writing. LaBrant argued that the arrangement was not a credit agreement but rather a modification to an existing credit agreement. The court disagreed finding that a “credit agreement” includes any “agreement by a creditor to take certain actions, such as . . . forbearing from exercising remedies under prior credit agreements.”
Promissory Estoppel. The court determined LaBrant failed to fulfill a prima facie case for estoppel. LaBrant did not establish that CitiMortgage made a clear and definite promise to modify the loan payments nor did LaBrant show that reliance upon CitiMortgage’s promise to modify the loan arrange would entitle LaBrant to stop payments altogether, rather than to simply decrease payments. Furthermore, Minn. Statute §513.33 precludes the claim of promissory estoppel when plaintiffs seek to enforce “an agreement to enter into a new credit agreement” or a modification of such an agreement.
Misrepresentation and Unjust Enrichment. The court ruled that LaBrant failed on his claim of negligent misrepresentation and unjust enrichment. LaBrant only showed that he was provided with false information when he was told that he would receive a loan modification upon submission of his application. There was no further proof of claim that CitiMortgage knew the statements were false at the time they were made or that CitiMortgage directed LaBrant to stop making payments altogether. Establishing an unfulfilled promise is not sufficient to show negligent misrepresentation. The court found that LaBrant failed on his unjust enrichment claim for merely alleging that a party has received a voluntary payment but not showing that such payments were unlawful or why the payments to defendants were not justified.
Violation of Minnesota Statute § 580. LaBrant further claimed that the defendants violated Minnesota Statute § 580 by failing to provide clear notice of the foreclosure and failing to postpone the foreclosure so LaBrant could cure his default. The court also rejected these claims finding that the record before the court clearly established that LaBrant was given notice of foreclosure and the § 580.11 does not impose a general fiduciary duty upon a mortgagee which would require the defendants to honor a request for postponement of foreclosure. The court mentioned that in two prior cases the plaintiff’s attorney made identical arguments which the court rejected in both cases. See Scott v. Wells Fargo Bank, 2011 WL 381766 at 4 (D. Minn. 2011); Cox v. MERS 794 F. Supp. 2nd at 1065 (D. Minn. 2011).
Finally, the court dismissed the LaBrant’s claim for “temporary and permanent injunctive relief” because injunctive relief is only proper as a remedy and not as a separate claim.
The court found in favor of CitiMortgage on all claims.
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July 10, 2013 | Permalink | No Comments
Rhode Island Superior Court Upholds MERS Assignment and Subsequent Foreclosure by Bank
In Cuevas v. The Bank of New York Mellon PC 2010-0553 (R.I. Sup. April 18, 2012), the court found in favor of Bank of New York Mellon in Cuevas’s action to quiet title and for lack of jurisdiction dismissed an appeal from the Sixth Division District Court ordering ejectment of the Cuevas.
In 2005, Cuevas secured a loan with First NLC Financial Services LLC and contemporaneously executed a Mortgage designating MERS as “nominee for Lender and Lender’s successors and assigns . . . borrower understands and agrees . . . MERS has . . . the right to foreclose and sell the property.” Two years later, MERS assigned the mortgage interest to Bank of New York Mellon. After Cuevas was made aware of a default in her mortgage and failed to make the necessary payments, the property entered foreclosure proceedings and Bank of New York purchased the property.
The court only addressed the substance of the quiet title claim. In accordance with established Rhode Island law (See Payette, Kriegel, and Porter blogged here), the court found the foreclosure proper. When the language of the mortgage clearly designates MERS as mortgagee and authorizes MERS to act as the lender’s nominee and enforce the note obligations, MERS is a valid holder of the mortgage with the power to foreclose and assign.
The court also held that the assignment of the mortgage to New York Mellon was proper because the assignment of a mortgage from MERS “does not fatally disconnect the note and mortgage debt.” Rhode Island law is clear that the holder of the note at the time of foreclosure proceedings is irrelevant because the mortgagee acts as the nominee for the current note holder. As a result of the assignment of the mortgage by MERS, Bank of New York Mellon held the Statutory Power of Sale because MERS’s entire interest in the mortgage was assigned.
Furthermore, the court found that as a “stranger” to the transaction, Cuevas had no standing to challenge the assignment. The court granted Bank of New York Mellon’s motion to dismiss and remanded to the District Court for a judgment upholding the foreclosure and assignment.
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July 10, 2013 | Permalink | No Comments
Washington District Court Denies Plaintiff Mortgagors’ Motion for Injunctive Relief Against Foreclosure Sale
In Erickson v. IndyMac Bank, No. C11-598RAJ (W.D. Wash. July 14, 2011), plaintiff mortgagors Gregory Erickson and Aleksandra Makarova filed this action in the United States District Court for the Western District of Washington against defendant mortgagee Indymac Bank for wrongful foreclosure, breach of contract, and unjust enrichment. Defendants filed a motion to dismiss for failure to state a claim and under the doctrine of collateral estoppel.
Plaintiff failed to file its opposition on time, and the court denied its motion for an extension. However, the court went on to note that defendant’s motion to dismiss had merit. The court observed that plaintiff’s “show me the note” complaint had been dismissed in an earlier action for failure to state a claim. The earlier claim, which sought an injunction to stop the foreclosure, was dismissed for plaintiff’s failure to comply with the Washington law providing the basis for mortgagors to obtain an injunction against a foreclosure sale. The court concluded that its earlier order dismissing plaintiff’s claim was dispositive.
The court noted, however, that plaintiff’s request for damages, which had not been included in the earlier complaint, was not barred by the previous litigation and that it may fit within a fraud exception to the Washington law that barred their clam for injunctive relief.
July 9, 2013 | Permalink | No Comments
Assignment Ball and Chain
By David Reiss
An undated Nationwide Title Clearing, Inc. “White Paper” (actually, more of an advertorial), Understanding Current Assignment Verification Practices, is making the rounds of the blogosphere. It opens,
The scrutiny of the completeness of collateral review and valid assignment chains has hit the mortgage industry hard, primarily because the industry went from a securitization process that didn’t require assignments to be recorded to a heavily scrutinized process requiring complete chains to be recorded at the county. This has made compliance extremely difficult for many lenders and others, especially because the industry went for so many years without this level of scrutiny. (1)
I’ll say!
This widespread lack of assignments could have negative consequences under the REMIC Rules. This is particularly a concern if it undercuts claims by purported REMICs that they acquired mortgages within the time required by statute.
I also found this passage intriguing:
just because a loan is supposed to be in MERS doesn’t always mean it is. We’ve found many examples of loans never having been assigned to MERS on land record, as well as loans that have been assigned multiple times out of MERS by prior investors/servicers, I would assume due to a poor review and preparation process . . ..(4-5)
I am not sure how courts would unwind such transactions. But I am sure we will find out . . ..
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July 10, 2013 | Permalink | No Comments